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2012 (1) TMI 313 - HC - Income TaxContribution for Compensatory Afforestation - Captial or Revenue Expenditure - Allowable u/s 37(1) or not? - The respondent had paid some amount towards contribution for compensatory afforestation. The assessee relying upon decision of Supreme Court, contended that this is an expenditure incurred for the purposes of business and allowable u/S 37(1). According to AO -The assessee was permitted to carry out mining activity for the year under consideration only in the already broken up area out of total area and remaining area was undisturbed. As per the Mining Plan the assessee will first carry out mining only in Block A. Which will last for about 7 years and then block B will be taken up for mining activity. Hence the entire payment cannot be said to be an expenditure for the said financial year. Accordingly the said amount of expenditure is restricted to 1/14th HELD THAT- CIT (A) while confirming the order of assessing authority said that the funds are used for a natural regeneration which the assessee participates indirectly. Therefore at no point of time could it be said that the assessee had incurred a capital expenditure giving the assessee a benefit of enduring nature for the purpose of earning segmented income to render the same to income tax. The amount was incurred as a revenue expenditure and is directed to be allowed in the year it has been incurred. We, therefore, held that It is not in dispute that the said payment was made as contribution for compensatory afforestation as per the directions of the Supreme Court. It is not permissible for the assessee to make phase-wise payment. Order of CIT is thus sound and proper - Decision against Assessee.
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